Introduction to ELSS

“Money can’t buy everything.” The saying goes apt for priceless things only as in today’s materialistic world; it is, in fact, the money which is necessary for buying everything. All that you need for your living, your comfort, your luxury is what money and only money can buy. So how do you make money? The answer is quite simple. You make money by earning when you work hard, your 100% to your job or whatever you do to earn money. But have you ever pondered about earning money smartly i.e. by having more money than you earn?

Yes, you heard it right! By investing your hard earned money in smart saving schemes like ELSS, you can easily boost your income and to get the life that you dream of. Investments made wisely impact your financial growth to a great extent. Investments are a significant step towards your pursuit of a happier and wealthier life.

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What is ELSS?

The term “ELSS” stands for Equity Linked Savings Scheme. It is actually a mutual fund which is equity based. The main purpose that it serves is helping you in availing tax deductions under Section 80C of Income Tax Act, 1961. Amongst other alternatives available for availing deductions under Section 80 C, ELSS is on a lower risk side.

Features of ELSS

ELSS are open-ended mutual fund investments for tax savings.

ELSS can be used to invest up to ₹1.5 lakh per year.

It is a diversified mutual fund where the majority of the corpus is invested in equity.

It has a lock-in period of 3 years

It can be bought from any fund house

Growth of ELSS is dependent on market performance

How to Invest in ELSS?

In order to apply for ELSS mutual funds, an investor will need to provide his personal details including PAN and Aadhaar number. This is mandatory as per KYC regulations so as to avoid fraud. KYC verification can be done online also. We at Groww can help you become KYC compliant.

Once you are KYC complaint, you can use our website, groww.in to invest in any mutual funds – ELSS mutual funds or otherwise.

One of the most recommended methods of investments in ELSS is SIP. It allows the investors to average their investments. Moreover, there is no additional taxation on SIP. SIP does not burden the wallet also as it gives the option of investing small amounts rather than investing a lump sum amount. You can read more about SIP here.

Why Invest in ELSS?

ELSS investment is best recommended for those who are in the initial phase of their career. When the earnings are humble, no one likes to take high risks and hence, it is best for beginners. But in much the same way, for people who are earning good but don’t like putting all eggs in one basket, ELSS is good too. This is because ELSS helps them to mitigate their tax by saving money without risk. Thus, there is no specific age where the ELSS investment is best. It suits everyone who wants to earn good returns by saving taxes simultaneously.

6 Advantages of ELSS Mutual Funds:

Now, let us dive into the advantages of ELSS straight away.

Only 3-year lock-in period as compared to NSC and PPF which have locking period of 6 years and 15 years respectively, the lock-in period of ELSS is very short i.e. 3 years.

Benefit of tax saving – investment in ELSS qualifies for tax exemption under Section 80C of the Income Tax Act, 1961. Moreover, it provides the investors with an additional benefit as regards to capital appreciation.

Options for dividend and growth – investors have two options for investing in ELSS i.e. dividend and growth. If the investment is made in a dividend scheme, then, a regular dividend can be earned during the 3 years of the lock-in period. If the investment is made in a growth scheme, then, the investor can get a lump sum amount after the expiry of the lock-in period.

Potential of high returns – The potential of earning returns is quite high as it is an equity-linked saving scheme investment. If the stock market position is favourable, higher returns can also be earned. If the economy rises, the investors having a good portfolio can earn maximum returns.

No limits for maximum investments – There is no maximum limit specified for investing in ELSS. However, the tax savings are available on a maximum of ₹1.5 lakh per year.

No minimum limit – Investors can invest in ELSS with an amount as low as ₹500. So it is quite beneficial for youngsters who have just started earning.

2 Disadvantages of ELSS Mutual Funds:

Risk factor: The risk is higher in ELSS as compared to NSC and PPF.

Restriction on withdrawal: The investor cannot withdraw the money invested before completion of tenure i.e. pre-mature redemptions are prohibited before completion of lock-in period of 3 years.

Final Words

In a nutshell, it won’t be wrong to say that ELSS is the best investment tool for everyone these days for the discrete benefits it offers to the investors. It is a smart way to use your savings for tax exemption and financial growth. If investments are done correctly under instructions of an experienced professional, one can easily form a good investment portfolio by including the top performing ELSS mutual funds in the same.

RESOURCES

Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.

Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, investment goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs.

Groww is an investing platform where users can find the best mutual funds to invest in and can invest their money without any hassles. Groww provides objective evaluation of mutual funds and does not advice or recommend any mutual fund or portfolios. Investor shall invest with their own descretion. Groww does not guarantee any returns and safety of capital.

Groww helps investors in the following way

· By providing objective evaluation of products available on Groww

· By bringing up red flags, if any, involved in the products. However Groww does not guarantee to bring out all red flags

· By being transparent about fees and charges involved in investing in a product

· By clearly representing the risk associated with buying a product

SECURE TRANSACTIONS ON GROWW

All transactions on Groww are safe and secure. Users can invest through SIP or Lumpsum using Netbanking through all supported banks. It uses BSE Star MF (with Member code 11724) as transaction platform.

MUTUAL FUNDS SAHI HAI

Mutual fund investments are very popular with individual investors because of the benefits they provide. Among the many advantages, the most important factors that drive investors to mutual funds are that Investors can

Portfolio is collection of mutual funds designed to meet your investment goals. Investing in mutual fund portfolios helps you in diversifying your investments and reduces the risk. Portfolios also help you in assigning an investment goals and make it easy for you to save for and achieve your goals. You can create a portfolio yourself or ask an expert to build it for you.

DISCLAIMER

NextBillion Technology Private Limited (with ARN-111686) and Finvantage Investment Adviser Private Limited (INA200008981) makes no warranties or representations, express or implied, on products offered through the platform. It accepts no liability for any damages or losses, however caused, in connection with the use of, or on the reliance of its product or related services. Unless otherwise specified, all return figure shown above are for illustrative purposes only. Actual returns will vary greatly and depends on personal and market circumstances. The information provided by our blog is educational only and is not investment or tax advice. NextBillion Technology Private Limited and Finvantage Investment Adviser Private Limited does not endorse views given or portfolio designed by third parties on the website, and these are their independent opinion on the scheme or performance of the schemes. Terms and conditions of the website/app are applicable. Privacy policy of the website are applicable. Prevent unauthorised transactions in your account. Receive information of your transactions directly to your mobile/email. Issued in the interest of investors, KYC is one time exercise while dealing in Mutual Funds - once KYC is done you need not undergo the same process again when you approach another Mutual Fund.